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Europe Default Insurance Costs Rise As Greek Fears Mount

LONDON (Dow Jones)--The cost of insuring European corporate and sovereign debt against default using credit default swaps rose sharply in early trading Monday, as fears about the euro-zone sovereign debt crisis and Greeces ability to avoid a default intensified.

"Concerns regarding an imminent default of Greece intensified" Friday, on reports that Germany is preparing contingency plans for a Greek default, UniCredit strategists said.

The Greek government announced fresh measures to fill its budget gap over the weekend.

Shortly before 0655 GMT, the SovX Western Europe index, which investors can use to buy or sell default protection on a basket of 15 sovereign borrowers, was 12.75 basis points wider at 346/352 basis points, according to index owner Markit.

The iTraxx Europe index of 125 high grade borrowers, including 25 banks and insurers, was 11.25 basis point wider at 198/200 basis points.

The Crossover index of 40 mostly sub-investment grade European corporate borrowers was 44 basis points wider at 798/805 basis points.

The Senior and Subordinated Financials indexes, whose constituents are the 25 financial institutions that are members of the Europe index, were 23.5 and 38 basis points wider at 306/312 and 546/560 basis points respectively.

CDS function like a default insurance contract for debt. A widening of one basis point in a five-year CDS spread equates to a $1,000 increase in the annual cost of protecting $10 million of debt for five years.

-By Mark Brown, Dow Jones Newswires; + 44 (0)207 842 9485,

(END) Dow Jones Newswires
September 12, 2011 03:21 ET (07:21 GMT)
Copyright (c) 2011 Dow Jones & Company, Inc.
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